Why Are German Cars More Expensive

Posted on 11/20/2017

Even among luxury vehicles, purchase price and maintenance on German autos tends to be a bit higher than their American and Asian counterparts, though many would argue that the difference in price is more than justified by the quality, prestige, and driving experience. Are you really just paying for quality, though? What is it that makes German cars more expensive?

Labor Costs

Most German cars are made, unsurprisingly, in Germany. Even BMW and Mercedes, which have manufacturing plants in the United States, are assembled from components made in Europe.

European labor costs are much higher. Especially in developed countries like Germany, the United Kingdom, and Belgium, high wages and taxes make manufacturing far more expensive than in the Americas and Asia. This is one of the reasons German automakers have plants in other countries - they can save a little money and sell vehicles at a lower price by outsourcing assembly to a cheaper labor force.

Those higher German labor costs get passed on to you, the end consumer. Assembling certain models in the USA lowers the retail price of those models a certain amount, but with components and parts still manufactured in Germany, your import is still going to cost a little more in initial price and some repairs.

Exchange Rates

The values of local currencies fluctuate, making global commerce just a little more tricky than manufacturing and selling domestically. Exchange rates mean that $1 American today might be more or less valuable in Germany next week, and with constant fluctuations, it can be difficult to predict how much a company overseas needs to charge for their products to generate the right amount of revenue after currency exchange.

In order to offset any losses that might occur due to fluctuations in exchange rates, foreign companies like German automakers pad their pricing a bit so that they can absorb a little of that uncertainty. Without that margin, German car prices would be in constant flux as the relative global markets adjust.

Engineering and Quality

German automakers are known for using higher quality materials and more meticulously engineered designs to create great vehicles that are fun to drive. Those better materials cost more, and when your car’s entire interior is built with quality in mind instead of economy, the base cost adds up. Now, take into account the details like high end suspension systems, the precise design and testing that goes into creating each vehicle model, and even the psychological research that German engineers use to determine exactly what drivers want from their cars, and you start to understand the price point.

Branding

Let’s be honest here - people are willing to pay a premium for anything they consider to be a status symbol. A lot of luxury German cars are expensive because if they were cheap, they wouldn’t be the same product anymore.

Brands like Mercedes-Benz, BMW, and now even Porsche offer lower priced models so that middle-class buyers have options, too, but the real brand value comes from exclusive vehicles at exclusive pricing. If everyone could afford a Porsche, it almost wouldn’t be a Porsche anymore.

That’s not a disparaging statement, either. There is real value in exclusivity, and since German cars really are higher quality, the brand values and reputations are well deserved.

There’s one side effect to brand value that isn’t strictly necessary, though.

Dealership Pricing

Since German brands are more expensive, US dealerships selling German cars charge premium rates for everything, whether the price is justified or not.

You might not know this, but dealerships don’t make much of their profit from selling cars. They do make some profit from car sales, of course. It’s just much less than you think. Most of the profit a dealership makes is generated by their parts and service department and all the maintenance and repair they do on the car they sold you.

Since that’s the big moneymaker for dealerships, they charge a premium rate for their parts and labor, and they provide maintenance and service even if it isn’t strictly necessary for the health of your vehicle.

At least you can reduce this part of your German auto ownership expenses. By going to a certified and licensed specialist in German cars, you get only the service you need at a fair market price, thereby cutting out the inflated dealer margins. Your car does need maintenance, and parts can be more expensive, but prices at reputable third parties are far more reasonable than the dealership.

The bottom line is that German autos are top-notch products with top-shelf pricing. You’re the only one that can decide whether or not there’s enough value there for you to make it worth the expense.